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BARRYROE FARM OUT FORMALISED
Dissemination: 20 September 2018 08:10 BST
Providence Resources (PVR LN) has announced the formalisation of its farm out agreement for the appraisal of its Barryroe field, offshore Ireland. The deal, which was originally announced in March this year, will see a Chinese consortium, headed by APEC Energy Enterprises finance a comprehensive appraisal drilling campaign in 2019. The farm-in offer originally constituted three firm wells, plus any required sidetracks, however the deal has subsequently improved from Providence’s perspective, with the programme now comprising four firm vertical wells, one horizontal sidetrack and two optional horizontal wells. On top of this, APEC will now pay PVR US$9m upfront and a further US$10.5m ahead of the campaign, to cover any early costs associated with the project. Importantly, in spite of this expanded work programme Providence is not required to relinquish substantially more than originally expected, with APEC still farming into a 50% stake, halving Providence’s original 80% interest.
We see today’s news as significant on a number of counts. Although we considered transaction risk low, sign off was required from multiple parties including both the Irish and Chinese governments, and therefore the fact that the agreement is now binding quells any concerns that the transaction would not complete. Secondly, despite industry cost inflation since announcement of the deal, the committed appraisal programme has grown in size – indeed the committed capital investment by APEC has more than doubled on our numbers to c.US$250m (gross) from c.US$100m, assuming that both horizontal well options are exercised. In our opinion, this is a clear demonstration of APEC’s enthusiasm for the project, and its intent to press ahead as quickly as possible. From Providence’s perspective, it now has a fully funded appraisal campaign, worth some US$100m net to PVR’s residual 40% stake, due to commence within the next 9 months. The campaign will determine Barryroe’s commerciality, and could add to the field’s c.350mmbbls of already discovered resource (gross, 2C recoverable).
The company released the news alongside interim results, which bear only limited significance. Cash on the balance sheet at the end of June totalled just over €12m, with zero debt – down from €19.5m at the start of the year. Naturally this does not include the benefit of today’s cash injection, which, after accounting for PVR’s carry on Barryroe, leaves the company in rude financial health.
Authors:
James Midgley, Energy Research Analyst
James.midgley@mirabaud.co.uk
+44 (0)20 3167 7273
Tim Hurst-Brown, Energy Research Analyst
Tim.Hurst.Brown@mirabaud.co.uk
+44 (0)20 3167 7276
Ranger..did not realise that PVR was an American Company!!!
Bronx..I do not know what you are insinuating. In my opinion the approval delay is not TOR's doing. Have a good weekend.
Bronx...why are you blaming TOR for the delay? Do you know something that that we don't!! The approval is coming from the Irish Government...and we all know how fast they are, and the Chinese...and I personally don't know much about them. Bronx maybe you can enlighten us!!!
We are still within the 3rd quarter. If there was any delay, stock exchange rules dictate that PVR will have to issue an RNS. We must be patient!
MANYANA...welcome to LSE Share Chat
We are getting a bit paranoid. Why should a company registered a few days ago in Singapore have anything to do with PVR.
We should not be too impatient, we are still within the planned period of this quarter. If I am not mistaken, if there was any deviation from the schedule, Stock Exchange rules
would require the company to issue a market update. So hold tight and keep our fingers crossed!!!
LONGWAIT and HYPNO...it is obvious that the BOD is permanently working and/or negotiating on something or other. This precludes the directors from purchasing shares...London Stock Exchange Rules!!!!!
I see that there is a big AAPG conference in Lisbon this week. PVR seems to be the conference kick-off speaker talking about Dunquin - and there are 3 other papers also on Dunquin by Eni and Repsol. See https://erc.aapg.org/2018/Technical-Program/Program/Day-1-Program Something serious must be afoot at Dunquin with all these papers?
http://www.providenceresources.com/sites/default/files/Mirabaud%20-%20PVR%20-%20March%202018_0.pdf
This is a no risk no cost deal with a massive Chinese consortium who are drilling 3 wells, 3 sidetracks and testing in 2019 - and it is all non recourse - where�s the downside?